Revamping Your Estate: What Divorced Parents with Kids in New Jersey Should Know
The Importance of Taking Control of Your Estate Plan when Getting Divorced with Children
On the long list of concerns that you may have when going through a divorce, revisiting your estate plan might not be at the top. However, while many divorcing couples with children focus on asset division, custody and visitation, and child support, divorce has a significant impact on your estate plan and failing to make the necessary changes can result in unintended consequences. Making sure that your estate plan reflects your current wishes is an important step following your divorce.
Must-Have Documents for Estate Planning After Divorce in NJ
Every individual has different needs for their estate plan. To ensure that your wishes are accurately reflected and that your children are financially provided for after the divorce, should anything happen to you, it is important to have a few key documents in place and ensure that these documents are reviewed post-divorce.
Will: Safeguarding Your Family’s Future Well-being
One of the most important documents to create or update when your divorce proceeding begins is your will. A will outlines who will inherit your assets in the event of your passing, how those assets will be distributed, and who will be named as a guardian for your children, if applicable.
Trust: Ensuring Financial Security for Your Children
Many individuals going through a divorce with minor children do not have a trust, however, there are many reasons why it is prudent to create a trust after your divorce is finalized. When you and your spouse were married, it is likely that you planned for all of your assets to go to the surviving spouse, should one of you pass away, and for the surviving spouse to use the marital assets and any life insurance proceeds to support the children. When you get divorced, if you wish for your children to inherit your assets, you may consider placing those assets in a trust to ensure that you maintain control over how and when the money is distributed to your children.
Through a trust, you can also set specific conditions on the release of funds. For example, you can require that a certain amount of funds be distributed for your children’s education or that they reach a certain age, like 25 or older, in order to receive a certain amount of money or their full inheritance. A testamentary trust can be created within your will and will come into effect upon your death. You might also choose to create an irrevocable life insurance trust (ILIT), which can hold, manage, and distribute your life insurance proceeds for your child(ren).
Beneficiary Designations: Who Inherits Your Assets?
It is also important to remember to update your beneficiary designations on your bank accounts, life insurance accounts, and retirement accounts. It is common for newly divorced couples to forget this important to-do item, but if your former spouse is listed as the beneficiary and you forget to update these accounts, the money and proceeds will go to your ex, even if you already revised your will. The beneficiary information on the account will dictate where the money goes. Instead, you could list your children as beneficiaries, a trust to manage the funds, or another close relative.
Powers of Attorney: Protecting Your Health and Financial Decisions
It is equally important to remember to revoke any power of attorney you may have granted to your former spouse in the past. Whether in the form of a healthcare directive or financial directive, you probably do not want your former spouse to continue to have the power to make major health or financial decisions on your behalf after the dissolution of your marriage.
Child Protection in Your Estate Plan When Divorcing: What to Ask Yourself
Do I Need to Name a Guardian for My Children in My Will?
If you currently share custody of your children with your former spouse, in most cases, if you pass away while your children are still minors, their other parent will be granted full custody. However, in case when the other parent is or becomes unable to care for your children or if they are deemed unfit to parent by the court, it is important to name a guardian in your will as a backup to ensure that your wishes for your child’s guardianship are clear and binding. Your guardianship designations should also align with the court’s custody orders to avoid conflict between the parties and ensure the court will uphold the designation.
Can I Provide for My Child’s College Education After I’m Gone?
While child support obligations typically end upon the death of the paying parent, you can still take steps to ensure that your child is provided for even after your passing. One of the ways you can do this is by setting up a trust with instructions earmarking funds for specific purposes like child support, college tuition, and other needs your child may have.
How Can I Ensure My Child With Special Needs is Financially Secure?
If your child has special needs, you can set up a special needs trust, which will allow them to receive money for their medical care, education, and other essentials without the money being counted as income that would disqualify them from receiving government benefits.
Does Relocating After My Divorce Affect My Estate Plan?
To complicate matters, if you relocate after going through a divorce or after creating your estate plan, it is important to consult with a lawyer where your will was drafted or your trust was formed and in any new jurisdiction where you acquire property or move to ensure that your guardianship designations and trusts remain valid and effective, and so you can make any necessary updates.
Estate Planning Adjustments Due to Divorce Decrees and Property Settlements
Your divorce decree and property settlement agreements, which outline the division of your marital assets, including but not limited to real estate, cash, retirement accounts, and other valuable property, can have a significant impact on your estate plan. For example, as part of your settlement agreement, you may be required to transfer ownership of certain retirement or investment accounts to your former spouse and may wish to designate other assets to your new intended beneficiaries through a revised estate plan. You may have intentionally divested certain named assets in your will to other individuals, but those particular assets may no longer be part of your estate following the division of your marital property. Therefore, estate planning should be a priority after a divorce, whether or not you have children.
Understanding Estate Tax Implications: Smart Estate Planning for Divorced Parents
New Jersey no longer imposes a state estate tax and, while there is a federal estate tax, it only applies to an inheritance of $12.92 per individual, making estate tax applicable to very large estates. Still, if you think your estate may be subject to the estate tax or if you move to a state which imposes an estate tax on a lower threshold, it is important to engage in careful estate planning. Putting your assets into a trust and/or making strategic gifts to your loved ones while you are alive can help to lower or avoid the burden of estate taxes.
Take Control of Your Estate Planning in a Divorce with Assistance from a Family Lawyer in New Jersey
A family law attorney on our team at Montanari Law Group who has knowledge and experience in estate planning can be extremely valuable during a divorce, particularly when children are involved. During settlement negotiations with your spouse, our skilled lawyers will be able to provide you with valuable counsel on how your decisions during this process may impact your future estate and children and the best strategy for ensuring that your needs now and wishes later on are protected. To request a free consultation and review the details of your case with an attorney who can advise and assist you, please contact us today at (973) 233-4396 . Our firm is dedicated to helping individuals and families with family law concerns and overlapping issues, such as long-term estate considerations, in Wanaque, Caldwell, Essex Fells, Teaneck, Franklin Lakes, Ridgewood, Short Hills, Woodland Park, New Milford, Millburn, Montclair, and throughout the northern region of New Jersey.
